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Stock Market Returns After First Rate Cut | Yield Curve Preceding Recessions | Investors Rooting for the Wrong Thing

By Derek Moore

Show Summary:

Derek Moore does a deep dive asking the question why is everyone rooting for the Fed to lower rates? If the Fed must lower interest rates, doesn’t that mean there is trouble? Should investors instead be rooting for stable but higher rates where the long end un-inverts as a proxy for higher growth? What happens to market performance between the last Fed hike and first rate cut? What is the historical performance of markets post the first Fed rate cut? Then looking at past yield curve (10-year treasury minus 3-month treasury yield) before recessions. How the Fed normally inverts and then un-inverts the curve by hiking and then lowering interest rates. Finally, what is the NBER (National Bureau of Economic Research Board) looking at to determine recessions?

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 Topics Include:

  • What is the inverted yield curve?
  • How have past yield curves inverted and un-inverted around recessions?
  • How does the stock market perform between the final rate hike and first rate cut?
  • How does the stock market perform after the first rate cut by the Fed?
  • Are rate cuts a sign of strength in the economy?
  • How the Fed typically causes inversions by hiking the Fed funds rate.
  • Historically the yield curve un-inverted because the Fed is cutting rates.
  • Will this time be different where long rates move higher to un-invert the curve?
  • What is the NBER National Bureau of Economic Research looking at for recessions?
  • How predictive of recessions is the yield curve?

Mentioned in this Episode:

Liz Young Sofi article showing S&P 500 Index market returns from last rate cut to first hike and post first Fed cut 

FRED Spread of 10-year treasury bond to 3-month treasury bill difference updated 

NBER business cycle dates (past recession dates) 

Option Selling ETFs Boom | Probability of Future Fed Moves | Bad News is Good News on Employment 

0DTE Options Analysis| Inflation Coming Back? | Strong US Dollar Impact 

 Jay Pestrichelli’s book Buy and Hedge 

Derek’s new book on public speaking Effortless Public Speaking 

Derek Moore’s book Broken Pie Chart